What Are the Critical Factors Behind the Failure of Europe’s State-owned Airlines? The Case of LOT and Alitalia

Adam Wojciech Duzynski

Student thesis: Master thesis

Abstract

The purpose of this thesis is to evaluate what factors caused failures of Europe’s national carriers, based on the comparison of LOT Polish Airlines, the national carrier of Poland and Alitalia, which is the national carrier of Italy. Both airlines belong to the group of so-called legacy carriers – airlines that were the countries’ only carriers before the liberalization of the airline market. However, neither of them was fully privatized (Alitalia and LOT are 51% and 100% government-owned, respectively) nor became a part of any big European airline holdings such as Lufthansa Group or Air France-KLM. Paolo Beria, Hans-Martin Niemeier and Karsten Frölich in their article “Alitalia – The failure of a national carrier”, published in 2011 in the Journal of Air Transport Management, argued that the chief reason for Alitalia’s lack of success was the interference of politicians. That brought mismanagement, influence by vested interest groups (including labor unions) and chaos in the airline’s choice of its fleet and hub strategies (Beria, Hans-Martin, & Froelich, 2011). This paper will focus on answering the question whether or not the reasons behind the failure of Alitalia are just as important in the case of another European state-owned airline - the Polish national carrier LOT. The analysis will be carried out in six parts. In the first, introductory part issues such as motivation and problem discussion will be presented. In the second part the methodology used in this paper will be talked over. In the third part the author will discuss in short the dynamic SWOT analysis concept, and, in more detail, the theory of Beria, Niemeier and Frölich on the failure of Alitalia, which is the centerpiece of this paper. This chapter will also briefly present some other theories that will be discussed in the next part. In the fourth part a thorough analysis of LOT will be performed, including the historical and financial analyses. This chapter will also include a more detailed presentation of the airline industry as a whole. The fifth chapter, finally, contains a dynamic SWOT analysis that will be implemented and that will be later on used to compare the cases of LOT and Alitalia. It will also evaluate other papers and theories that are shortly presented in the fourth part. Lastly, in the concluding part, a summary will be given that will then answer the research question.

EducationsMSc in International Business, (Graduate Programme) Final Thesis
LanguageEnglish
Publication date2016
Number of pages91
SupervisorsBjörn Preuss